Bipartisan plan for premium-support reform of Medicare?

posted at 10:25 am on December 15, 2011 by Ed Morrissey

Democrats had to have a plan to tie all Republican candidates to that crazy notion floated by Paul Ryan to transform Medicare into a premium-support plan, an idea so radical that no Democrat or even sane person could possibly support. Why, even Newt Gingrich called it “right-wing social engineering”! Barack Obama could get up on the stump all year and tell seniors that only he could hold back the hordes of crazy Tea Party activists that would throw Grandma to the mercy of — quelle horreur — insurance companies. Wait, I wrote that inaccurately. It should have been eeeeeeeeeevil insurance companies.

A Democratic senator, Ron Wyden of Oregon, and a Republican member of the House, Paul D. Ryan of Wisconsin, unveiled a bipartisan plan on Wednesday to revamp Medicare and make a fixed federal contribution to the cost of coverage for each beneficiary. …

Under the proposal, known as premium support, Medicare would subsidize premiums charged by private insurers that care for beneficiaries under contract with the government.

Congress would establish an insurance exchange for Medicare beneficiaries. Private plans would compete with the traditional Medicare program and would have to provide benefits of the same or greater value. The federal contribution in each region would be based on the cost of the second-cheapest option, whether that was a private plan or traditional Medicare.

In addition, the growth of Medicare would be capped. In general, spending would not be allowed to increase more than the growth of the economy, plus one percentage point — a slower rate of increase than Medicare has historically experienced.

To stay under the limit, Congress could cut payments to providers and suppliers responsible for the overspending and could increase Medicare premiums for high-income beneficiaries, the lawmakers said.

That’s not too far off from Paul’s original proposal. It would not affect current Medicare recipients, who would continue to operate under current Medicare coverage — although perhaps they might have an option to use the new system if they found it more to their liking. Anyone not in Medicare now would be enrolled in what would be a more robust Medicare Advantage-type system, where the Medicare board creates an exchange of qualifying insurance plans from which enrollees can choose. In this manner, Medicare costs become much more predictable and controllable, while spreading the risk to private risk pools instead of taxpayers.

But what does that do to ObamaCare and the strategy of demonizing Republicans on privatization? The NYT admits that this is a tactical defeat, even at this stage:

In 2010, many Republicans won House seats — and the support of older voters — by arguing that President Obama’s health care law would damage Medicare. Democrats are hoping to retake the House by arguing that Mr. Ryan and other House Republicans are pushing for the privatization of Medicare, which they say could greatly increase costs for beneficiaries.

The new Wyden-Ryan proposal, by blurring the contrast between the parties on this issue, could make it more difficult for Democrats to win the argument.

You think? If Wyden gets a few more Democrats to join the agreement — and there is no shortage of red-state Democrats looking to get re-elected this cycle and needing some bipartisan cover — the deal will make Obama look like the extremist, not Ryan and the Republicans. It also eliminates the argument that the federal government needs to run all of the health-care industry as it does for seniors, since the eeeeeeeeeeevil insurance companies can be trusted to provide for senior care after all.

Medicare is the single greatest threat to the fiscal health of the United States. Congress has to act to reform it before it gets too late to avoid the debt crisis it will provoke. This is the first inkling that Congress can actually act on this crisis, and if Obama tries to stamp it out in order to selfishly protect a political advantage, then we should make sure to headline it in screaming letters.

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I don’t understand why we can’t have a buy-out program for Social Security and Medicare. Old folks (a.k.a. our parents) always claim that they paid into the system and they want their monies worth. So why not cash em out, deposit the sum of their total tax contribution into private accounts, convert the ballooning perpetual debt into a fixed sum, and pay it off over time. This way, old folks get their entitlement money back (heck, I’d even back this plan if we paid some interest) and I get to stop paying for their healthcare and start devoting my funds to me, my family, and my student loans.

Win Win

Speakeasy on December 15, 2011 at 9:57 AM

Not if you want to pay it back with interest. Where do you think the interest would come from?

Dante on December 15, 2011 at 9:58 AM

I didn’t say I wanted to pay interest, only that I could back a plan that paid interest. More to the point, we’re talking about converting a variable interest non-terminable debt (which is where all the arguments about unfunded liabilities come from) into a fixed interest “mortgage” that we would have to pay off (so yes, to an extent, I would still be paying for their healthcare) but would fix our liability at a specific sum that would eventually evaporate.

I have to say that Ron Wyden is one of the few really serious people in Congress. he is quite libweral but he isn’t a hyperpartisan who is only looking for political advantage, like the Schumers and Durbins. He knows that if Medicare continues to eat bigger and bigger portions of the federal budget, there is going to be less and less money for all the other things liberals want to spend our money on. Some of them are finally waking up to this. The math is just too compelling.

I also think this is pretty indicative that smart Democrats think Obama is not going to win next year, so they have got to start trying to save themselves and their own seats and stop worrying about what he wants to campaign on.

Probably the smartest thing Obozo could do is: Try to make this idea his own – see Bill Clinton/Newt Gingrich. The ObamaCare law is going down, it is only a matter of time. If the Supreme Court doesn’t gut it, then the next Congress will (go ahead, tell me it ain’t gonna happen). Since he needs his legacy so bad, why not work with a plan that can get him his brownie points with the indy’s and the more conservative (I know, I know… really?) democrats.

There was a TV piece recently at a hospital where the reporter asked a group of health care workers if Medicare was going to be there for them when they retired. They all shook their heads “no”. I wish he had followed up with “why?”. I suspect it’s because it so ghastly expensive, they sense it can’t possibly be maintained as it is. It reminds me of the Thomas Jefferson (?) quote, about how democracy works until people realize they can vote themselves money from the Treasury. Which is what’s happening now — voting for those who support continued deficit spending. And then, democracy fails. So, what’s next. Crushing debt leading to … ?

I also think this is pretty indicative that smart Democrats think Obama is not going to win next year, so they have got to start trying to save themselves and their own seats and stop worrying about what he wants to campaign on.

Bingo. Ex: She’s transforming before our very eyes. And she’s not the only one.

I also think this is pretty indicative that smart Democrats think Obama is not going to win next year, so they have got to start trying to save themselves and their own seats and stop worrying about what he wants to campaign on.

Good news all around.

rockmom on December 15, 2011 at 10:37 AM

I was thinking the opposite actually. I think that Obama is probably telling his minions to start doing these types of bipartisan deals because it’s getting closer and closer to the end of his career. I’m wondering if he believes this will be seen as him moving “toward” the center and will garner the votes of some of the most ignorant independents.

I like Ryan’s plan but I don’t want to underestimate Obama’s narcissism and desire for power.

Oh, look what’s under the Christmas tree! A revamped Medicare reform proposal, just in time for the Fox News Channel debate panel to ask GOP candidates about tonight. You know who this doesn’t help, right?

Glenn Reynolds over at Instapundit has a regularly occurring point about the ‘higher education bubble’ where government subsidizes have allowed Universities to continue to raise tuition faster than the rate of inflation.

That same effect will happen with insurance premium subsidizes. The government support allows the insurance companies to continue to raise insurance premiums, at the same time that government support increases demand for insurance.

This idea that government can ‘help people’ pay for their insurance only makes insurance more expensive. The idea that government can ‘help people’ get medical services only makes those services more expensive for everyone else.

All of this happens because an army of Sally Struthers imitators are all demanding that government ‘do something’ for the people.

…..and that is not why we have instituted a government, to do something for the people.

Gee, am I in dreamland?? Claire McCaskill criticizes Harry Reid; now this bipartisan effort to reform Medicare. But I still have faith in Obama, Reid, and Pelosi to derail this Medicare fix because it’s the biggest threat to their singular accomplishment of universal health care, threatens their new 30+ million new bloc of ‘entitled’ voters, corrals more of the Hispanic vote since Latinos seem to like more than others.

Oh oh, the do nothing congress might actually do something! Obama’s got to be fuming. If this goes forward I wonder if he will veto it, that would really throw a monkey wrench into his campaign strategy as he will now be the impediment to getting things done; a tag he wanted to pin on the Republicans. Newt might not be too happy either, his dumb comment about Ryan’s plan is hurting him as much as the Pelosi couch debacle.

‘To stay under the limit, Congress could cut payments to providers and suppliers responsible for the overspending”

As a provider I have taken a Medicare cut almost every year as long as I can remember. As it stands many doctors are limiting the number of medicare patients they see a day (rationing) or not seeing any new medicare patients at all. I would argue that the medicare crisis is one almost purely of demographics with more people eligible to enroll and fewer people paying in to the medicare fund ( yes I know there is no real fund).

The Democrats and progressive Republicans have made this almost impossible. They’ve pushed us all into the Social Security system and made some of us feel all warm, fuzzy, and secure. Now too many people depend upon Social Security to live on and there is no possible way they could pay for medical insurance on the pittance they receive from it. I pay approximatly $750/month for my work provided insurance and I have no idea how much the company pays on top of that. I’d be willing to bet that it is close to double what I pay. That would take a huge cut from the Social Security check the retirees get now.

That said, I believe we need to ultimately use your solution. I’ve given up thinking that I’m going to receive a dime from Social Security and I’m only 48 years old. Hopefully my 401K can recover and be enough to pay for my needs when I retire at 90 years old :)

If you don’t deal with the fraud and litigation in our medical system, it doesn’t matter who pays for it. It will always cost too much. Just keeping it private won’t deal with the real issue either since there is no real free-market in healthcare. Medical Care systems in this country have developed regional monopolies to keep cost high and to dictate the terms of coverage to the insurance companies. Encourage real competition in pricing, punish fraud, and sift out bogus litigation is the only way. But what’s the likelyhood a bunch of lawyer politicians are going to deal with the real issues?

As a side note: My son broke his finger 2 years ago so I took him to the E.R.-A small metal finger stint that cost $11.00 at CVS was charged $250.00 by the hospital. A drop of tylenol, a bottle cost $5-$8, was charged $80.00 by the hospital. A doctor that took a whole 15 minutes of his time with my son charged the insurance company $850.00 for his time, and the hospital ER room charged $1100.00 for patient services (checking us in = 10 minutes clerical work). Oh…those evil insurance companies..look at their rates! (snarc)

Insurance companies are just the messengers and their premiums only reflect the cost of abuse in the system. If our solutions are based on addressing the “insurance companies”, then we are only shooting the messenger to avoid dealing with the real issues.

That said, I believe we need to ultimately use your solution. I’ve given up thinking that I’m going to receive a dime from Social Security and I’m only 48 years old. Hopefully my 401K can recover and be enough to pay for my needs when I retire at 90 years old :)

Zooid on December 15, 2011 at 11:06 AM

I wholeheartedly believe I should stop contributing to the Social Security scam and put that money into various CD’s. I will see more come out of it, even though most are barely above 1% interest. Those intellectuals in D.C. tend to disagree, however.

I wholeheartedly believe I should stop contributing to the Social Security scam and put that money into various CD’s. I will see more come out of it, even though most are barely above 1% interest. Those intellectuals in D.C. tend to disagree, however.

Turtle317 on December 15, 2011 at 11:14 AM

I would gladly give up any claim on future Social Security benefits if they’d allow me to use HALF of what I pay into it right now to invest in my 401K.

It reminds me of the Thomas Jefferson (?) quote, about how democracy works until people realize they can vote themselves money from the Treasury. Which is what’s happening now — voting for those who support continued deficit spending. And then, democracy fails. So, what’s next. Crushing debt leading to … ?

Paul-Cincy on December 15, 2011 at 10:47 AM

The quote was from de Tocqueville:
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.

That’s what I thought. It reinforces Newt’s comment that the original plan was a little extreme.

stenwin77 on December 15, 2011 at 11:26 AM

I disagree. For starters, Ryan neither completely disowned the budget proposal nor did he declare this plan to be superior. Further, this is about advancing the conversion while condemning a majority of Democrats for their refusal to take this issue seriously. Also, the proposal outlined by Ryan and Wyden is different than Newt’s idea:

The latter would be a fee-for-service plan as an option within the capped premium-support system and so competing with the private insurers, not today’s open-ended fee-for-service Medicare as an alternative to a premium-support system (an idea that Newt Gingrich has proposed, and which alas would be very unlikely to help alleviate Medicare’s woeful inefficiency or the government’s fiscal problems).

But Newt’s main complaint about the original Ryan plan was that it didn’t have the option to use traditional Medicare. In that sense, this proposal moves more toward Newt. In fact, it gives Newt a chance to gracefully back off of his “right wing social engineering” charge and support a tea party darling.

But Newt’s main complaint about the original Ryan plan was that it didn’t have the option to use traditional Medicare. In that sense, this proposal moves more toward Newt. In fact, it gives Newt a chance to gracefully back off of his “right wing social engineering” charge and support a tea party darling.

gengwall on December 15, 2011 at 11:47 AM

His main complaint was that politicians should not pass reforms until they become popular. I would also point-out that, instead of gradually getting rid of traditional Medicare, Newt permanently retains it as an option.

His main complaint was that politicians should not pass reforms until they become popular.

youngTXcon on December 15, 2011 at 11:56 AM

How is a lack of popularity “social engineering”?

gengwall on December 15, 2011 at 12:07 PM

“What I was saying was in answer to a very specific question, which was: if there’s a program which is very, very unpopular, should Republicans impose it, and my answer was no. When we passed welfare reform, 92 percent of the country favored it, including 88 percent on welfare. Reagan ran to be a popular president, not to maximize suicide. And I think conservatives have got to understand, you govern over the long run by having the American people think you’re doing a good job, and think you’re doing what they want. Now the question is, how do you have creative leadership that achieves the right values in a popular way?”

If patients had to shop for their medical care, prices would be more negotiable. Maybe the gubmint should just send us a check for a premium and let us shop and buy what we want. After all, that’s what Social Security is: they send us a check and we can spend it on whiskey or rent or whatever, and thus the system does not create any bubbles.

Eventually, of course, insurance should be totally private. But premiums vouchers is a good start.

That’s not what I was addressing. I was addressing Gingrich’s May 15th Meet the press interview where he called the Ryan plan “right-wing social engineering”. Here are the pertinent parts of the Gingrich quote:

I don’t think right-wing social engineering is any more desirable than left-wing social engineering. I don’t think imposing radical change from the right or the left is a very good way for a free society to operate. I think we need a national conversation to get to a better Medicare system with more choices for seniors…
I, I think that, I think, I think that that is too big a jump. I think what you want to have is a system where people voluntarily migrate to better outcomes, better solutions, better options, not one where you suddenly impose upon the–I don’t want to–I’m against Obamacare, which is imposing radical change, and I would be against a conservative imposing radical change.

His issue with the Ryan plan was that it “IMPOSED” change on seniors. This new proposal specifically addresses that charge by giving seniors the choice. Gingrich should be very pleased.

I wish we had a Ryan, a McCotter, or anyone running who is willing to think “outside of the box”. No, Paulbots, I don’t mean “outside of the solar system”. (Paul would be 100 times more electable were it not for his suicidal foreign policy views.)

Newt has been known to think unconventionally at times, but some of those times he has been so far off the reservation that it makes one worry.

I should note that the Ryan camp denied the original Ryan plan imposed anything. But this new proposal seems to be even more up front in its insistence that seniors won’t be forced to do anything if they don’t want to.

The democrats have pushed and rammed through all kinds of programs, policies and waste over the last three years that has and will continue to explode the debt, so I am sceptical that they are serious about this reform in the long run. I’m inclined to think that this is a set-up for later demogoguery as the election hits full speed with the theme being how republicans throttle and derail reform.

Democrat house and senate big wigs have accused republicans of killing people via public policy; therefore, I think this is just a ruse that is currently masquerading as bipartisan reform until the hammer can be dropped. Republicans should tread lightly.

Newt has long made it known that he feels consensus must be reached on major legislation before it can be passed. Note that he says “we need a national conversation” and that the Ryan plan “is too big a jump”. So the plan is an imposition because the public at large has not agreed to it.

“In addition, the growth of Medicare would be capped.” How, exactly, with an enlarging, aging population?

“To stay under the limit, Congress could cut payments to providers (I receive less now from Medicare than I did in 1986 and that’s NOT in inflation adjusted dollars. Good luck finding a doctor.)…..and could increase premiums for high-income beneficiaries, the lawmakers said.” How much of an increase? What I pay now? Ten grand a year?

Well youngTXcon, I think we are both right. One thing leads to another. Less of a jump (less “social engineering”) leads to more popularity and consensus. Regardless, it addresses Gingrich’s concern(s).

As a side note: My son broke his finger 2 years ago so I took him to the E.R.-A small metal finger stint that cost $11.00 at CVS was charged $250.00 by the hospital. A drop of tylenol, a bottle cost $5-$8, was charged $80.00 by the hospital. A doctor that took a whole 15 minutes of his time with my son charged the insurance company $850.00 for his time, and the hospital ER room charged $1100.00 for patient services (checking us in = 10 minutes clerical work). Oh…those evil insurance companies..look at their rates! (snarc)

mtucker5695 on December 15, 2011 at 11:06 AM

OK. But did the insurance pay all of that? I’ve had the same kind of experience. I went to the ER for something relatively minor and the bill was $3000 charged to insurance. But the insurance company wrote $2000 off. That’s how the game is played. Hospitals will charge aninsane amount, then the insurance writes most of it off. And not just for ER either, this goes for all medical procedures.

Leaving aside the case to be made that all this government tinkering with health insurance and social security is Unconstitutional as all get out, I agree with everyone saying that this is the way government should be going. The logic even extends to health insurance itself. There’s no need for a fancy government-run boondoggle, just create an “assigned risk” pool to underwrite insurance for people with preexisting conditions. Why is that so hard?

Well youngTXcon, I think we are both right. One thing leads to another. Less of a jump (less “social engineering”) leads to more popularity and consensus. Regardless, it addresses Gingrich’s concern(s).

gengwall on December 15, 2011 at 1:04 PM

I realized that while I was posting that comment. Still disagree with Newt, though.

Fair enough youngTXcon, but do you agree that this gives Newt some wiggle room to cozy up to Ryan and get more tea party folks (and conservatives in general) on his side? Whether he’s right or wrong, he can “claim” he is right by saying Ryan has moved in his direction. He can say: “this is a good first step in having the kind of national conversation I referred to. Glad to see Congressman Ryan sees the benefit of less radical steps and more bipartisan ‘consensus’”. I mean, I think this is a huge window of opportunity for Gingrich to fix a faux pas.

Fair enough youngTXcon, but do you agree that this gives Newt some wiggle room to cozy up to Ryan and get more tea party folks (and conservatives in general) on his side? Whether he’s right or wrong, he can “claim” he is right by saying Ryan has moved in his direction. He can say: “this is a good first step in having the kind of national conversation I referred to. Glad to see Congressman Ryan sees the benefit of less radical steps and more bipartisan ‘consensus’”. I mean, I think this is a huge window of opportunity for Gingrich to fix a faux pas.

I agree with a lot of commentators on here that Medicare is too entrenched for serious changes. I think the Wyden-Ryan plan is a positive first step, and anything moving in the direction of fiscal responsibility has to be a good thing. If this somehow move through, chalk it up as a win for the good guys.

Ed, you don’t mention the scary details. Like the inclusion of a public option. This is horrible.

Most people don’t remember that before 2010, Paul Ryan was considered a progressive republican from Wisconsin. Even the Boss Emeritus knows this.

Ryan is supporting a public option AND mandates insurance.

A very intriguing new development on the health care front over the past 24 hours, as Paul Ryan and Ron Wyden team up to offer a proposal under which individuals will be faced with a mandate to buy government-subsidized health insurance on regulated “exchanges” that will include a robust public option with Medicare payment rates.

Ed, you don’t mention the scary details. Like the inclusion of a public option. This is horrible.

Most people don’t remember that before 2010, Paul Ryan was considered a progressive republican from Wisconsin. Even the Boss Emeritus knows this.

Ryan is supporting a public option AND mandates insurance.

A very intriguing new development on the health care front over the past 24 hours, as Paul Ryan and Ron Wyden team up to offer a proposal under which individuals will be faced with a mandate to buy government-subsidized health insurance on regulated “exchanges” that will include a robust public option with Medicare payment rates.

Politiceaux on December 15, 2011 at 2:23 PM

Medicare already is a public option – In fact, it’s worse because it’s the ONLY option. We are talking about making changes to a broke system, and this is obviously an upgrade on the mess we have now.

I think is what Slate/Politiceaux are squawking about (these are Ed’s words but I trust they accurately reflect the Ryan/Wyden proposal):

Anyone not in Medicare now would be enrolled in what would be a more robust Medicare Advantage-type system, where the Medicare board creates an exchange of qualifying insurance plans from which enrollees can choose.

“would be enrolled” I guess can be twisted into a mandate, even though these people would be enrolled in Medicare in some shape or form anyway so they aren’t any more “mandated” into the new system than they would have been into the old.

“Medicare board creates an exchange of qualifying insurance plans” sure sounds like a public option, because it sorta is, but as HTnFBCoach points out, Medicare already is a public option and the Ryan/Wyden plan introduces more private sector products to choose from so rather than supporting a public option, it dilutes the current public option.

Insurance exchanges? Is this kinda like what Romney set up in Massachusetts?

In addition, the growth of Medicare would be capped. In general, spending would not be allowed to increase more than the growth of the economy, plus one percentage point — a slower rate of increase than Medicare has historically experienced.

I’m not keen on this formula. Medicare is growing because of the sheer number of boomers who are hitting retirement age. The growth needs to have some relationship to the number of people being served, not the growth of the economy.

Insurance exchanges are a government regulated brokerage, so to speak. It is just a shopping place for people to buy insurance. The difference from a buyhealthinsurance.com or some such thing is that the government has oversight. That is fair in a sense because it is the government’s money (at least to an extent) that is being spent. I’m not thrilled with government oversight, but I understand hwy they want it.

Answer #2: A traditional Medicare fee-for-service option would operate within a premium support framework. This Medicare fee-for-service plan would be forced to compete alongside private options within a fundamentally reformed program. Just like in the House-passed budget, seniors would receive a fixed amount and be allowed to chose from a select set of Medicare-approved plans. A difference with this bipartisan effort is that one of the Medicare-approved plans would be a Medicare fee-for-service option. The financing for all options is the core reform, maximizing the power of the senior and the benefits of choice and competition.

It still is going to be a hard sell that “competition will reduce premiums” unless there is meaningful malpractice reform. Medicare already reimburses lower than any private sector networks (right jdsbengaltiger?) so the insurance companies have very little room to negotiate costs down. And their profit margins are already pretty thin so they don’t have a lot of top side to give up either in competing with the Medicare fee for service option. So simply introducing private sector options won’t accomplish much IMO.

I think this thread is running out boys… Anything that requires math tends to scare people away.

gengwall is entirely correct… competition won’t drive down costs as much as we hope as long as doctors are incentivized to run every single test in the book and malpractice insurance is sky high. There is also a supply and demand problem here – too many patients and not enough doctors. We need more med schools, and more people choosing to be doctors. Obamacare makes that problem even worse.

It needs to go way beyond insurance to the whole way healthcare is provided i.e.supply side reforms. The main problem with healthcare is the cost due to terrible productivity and not enough competition. The insurers are not the real problem. We need to find cheaper, more efficient models like Rick Scott’s walk in clinics in Florida. Break up the monopolies. The only way to do that is privatisation. Private insurance is a good start as they will have an incentive to find the cheapest providers. Look how competition worked for Medicare D. Really every aspect of healthcare needs to be deregulated including med schools.

“It needs to go way beyond insurance to the whole way healthcare is provided i.e.supply side reforms. The main problem with healthcare is the cost due to terrible productivity and not enough competition. The insurers are not the real problem.”

breffnian on December 15, 2011 at 5:48 PM

Right on point!
Insurance or payer reform is meaningless unless we break the local monopolies enforced by state health departments controlled by the medical guilds. We need to create for profit corporate medical providers in every state to attract capital and end the limits placed on new providers by such devices as certificates of need.